Monday, November 12, 2012

Competition Law and Policy in Turkey - Recent Developments and Prospects - Part one (Article)

By Yusuf-Kaan Gurer, LL.M. Candidate (Istanbul), Ph.D. Candidate (Cologne)

Introduction 

According to the World Economic Forum's latest Global Competitiveness Report [1] (GCR) Turkey is "one of the countries that improved most in the GCI rankings" in 2012 by moving up 16 places to attain the 43rd spot. The country's continued and rapid economic growth - 8.4% in 2011 - goes hand in hand with considerable improvements in its competition policy. 

Driven by the accession negotiations with the European Union and eager to liberalize its economy, in 1994 Turkey introduced Act No. 4054 on the Protection of Competition [2] (Act 4054) with the aim "to ensure the protection of competition by performing the necessary regulations and supervisions". In order to enforce the provisions of this Act, three years later, in 1997 the Turkish Competition Authority [3] (TCA) became operational with the Board (TCB) as its decision-making body. 

This series of three articles will give an overview of the recent developments in Turkey's aim to modernize its competition law regime to further boost effective competition and thus economic wealth. While Part I focuses on cartel prohibition, Part II will deal with dominance and, finally, Part III with merger control.

Cartel prohibition 

In its basic structure Article 4 of Act 4054 [4], which contains the laws prohibiting cartels, resembles Article 101(1) TFEU and hence covers anti-competitive agreements, concerted practices and decisions by associations of undertakings. However, whereas Article 101(1) TFEU contains the unwritten criterion of appreciability [5] Turkish competition law does not contain any form of such an appreciability or de minimis threshold. As a result even agreements with minimal competitive significance may constitute a violation Article 4 of Act 4054. In similarity to EU legislation according to Article 5 of Act 4054 (modeled after Article 101(3) TFEU) exemption may be applicable, either in the form of individual exemption issued by the Board or block exemption [6]. 

Despite some national characteristics the Turkish cartel prohibition regime closely follows the European model but, with regards to damage claims, also includes aspects from U.S. competition law such as treble damages. 

In terms of sanctions and in particular fines 2011 was a record year with approx. 350 million Turkish Liras (TL) [7] of fines imposed in Article 4-cases - a figure which most probably will not be reached in 2012. In general, infringements of Article 4 may lead to fines up to 10% of a cartel member's turnover generated in Turkey in the preceding fiscal year and a fine of up to 5% of this sum can be imposed on an employee. [8] However, in practice the fines imposed so far range from 2-4% of the Turkish turnover. 

In 2009 the Regulation on Active Cooperation for Detecting Cartels [9] (Leniency Regulation) entered into force introducing the main principles of leniency as established in European law to the Turkish antitrust regime. According to Article 1 of the Leniency Regulation its scope is limited to cartels which are defined as "agreements restricting competition and/or concerted practices between competitors for fixing prices; allocation of customers, providers, territories or trade channels; restricting the amount of supply or imposing quotes, and bid rigging" [10]. 

The most important cases in relation to leniency are Sun Express/Condor [11] of October 27th, 2011 and Sodium Sulphate [12] of May 3rd, 2012 . In Sun Express/Condor the TCB held that the airlines Sun Express and Condor fixed prices with regard to passenger flights between Germany and Turkey and that this constituted a violation of Article 4 of Act 4054. While a fine of 733,016.80 TL was imposed on Condor, Sun Express was granted full immunity from fines due to its leniency application. In Sodium Sulphate two companies active in the markets for powdered sodium sulphate, crystallized sodium sulphate and salt-cakes were fined a total of 984,200 TL, while their general managers were fined 20,718 TL due to price-fixing and customer allocation. One of the cartelists was granted a fine reduction of 1/3 and its general manager a reduction of 1/2 of the original fines based on "active cooperation" in the sense of the Leniency Regulation. 

There are a number of significant cases in relation to Article 4 where decisions were issued recently. One of these is the TCB's Banking Industry decision [13] of March 7th, 2011. Seven banks were fined approximately 72 million TL due to a gentlemen's agreement which ultimately led to customer allocation. 

One of the most prominent Article 4-cases in Turkey is the TCB's Automotive Firms decision [14] of April 18th, 2011. After having investigated allegations raised against 23 automotive manufacturers with regard to information exchange and negotiations on future company goals, stocks, sales volumes, prices and sales strategies in the market for new passenger cars and light commercial vehicles, the TCB imposed fines on 15 automotive manufacturers amounting to a record sum of 277.4 million TL. The TCB held that meetings between the cartelists were initiated with the main aim to eliminate the risks arising from the competitors' unpredictable behavior. 

In its Cement decision [15] of April 2012 the TCB imposed total fines of 49.2 million TL on 10 cement manufacturers as a result of price-fixing in eastern and south-eastern Anatolia. The highest individual fine was approximately 11 million TL. The TCB thus continues its tendency to impose heavy fines. 

In its Part two this article will continue with an overview of the Turkish competition law regimes' developments in relation to dominance. 


------------------------------------------------ 

[1] The GCR is an annually published report by the World Economic Forum and analyses the growth opportunities of 144 national economies based on the so-called Global Competitiveness Index. The 2012-2013-report is available at http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2012-13.pdf. 

[2] An English version of the full text of the Act is available at the TCA's website

[3] The website of the TCA is available at www.rekabet.gov.tr. 

[4] Article 4 of Act 4054: "Agreements and concerted practices between undertakings, and decisions and practices of associations of undertakings which have as their object or effect or likely effect the prevention, distortion or restriction of competition directly or indirectly in a particular market for goods or services are illegal and prohibited." 

[5] Cf. Commission Notice on agreements of minor importance which do not appreciably restrict competition under Article 81(1) of the Treaty establishing the European Community (de minimis) of December 12th, 2001 according to which agreements between undertakings "do not appreciably restrict competition" in case the parties' aggregate market share does not exceed 10% horizontally or 15% vertically. 


[7] 1 TL equals approx. 0.43 Euro and 0.56 USD. 

[8] Cf. Article 16 of Act 4054. 

[9] An English version of the Regulation is available at the TCA's website

[10] Article 3 of the Leniency Regulation.

[11] TCB, decision no. 11-54/1431-507 of 27.10.2011 - Sun Express/Condor. 

[12] TCB, decision no. 12-24/711-199 of 03.05.2012 - Sodium Sulphate. 

[13] TCB, decision no. 11-13/243-78 of 07.03.2011 - Banking Industry. 

[14] TCB, decision no. 11-24/464-139 of 18.04.2011 - Automotive Firms. 

[15] A reasoned decision has not been published yet. 

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